Emptier beaches and more waves mean that winter is coming. And winter means holidays, food comas, and a nostalgic look back at the year mixed with excitement and planning for the year that comes. Speaking of planning, this is also the time for employer benefit elections and open enrollment for healthcare exchanges! (And yes, that certainly does warrant the exclamation point of excitement.) So let’s take a little stroll through some dos and don'ts to make sure your financial self gets the same kind of care and attention the rest of you is getting.
So much for the summer doldrums! Three big things happened this month that probably went unnoticed by most of you reading this. And please note, when we say “big things that went unnoticed”, we mean “big” in that super geeky personal finance way and not “unnoticed” because we think you are all ostriches.
Those three things are, in no particular order of importance: our one-year anniversary, passage of the DOL fiduciary rule, and a Fed announcement of quantitative tightening. If you caught all three of those things this month, give yourself a gold star! And if not, well that’s what we’re here for...just keep reading.
Over the weekend, Italy voted “no” in a national referendum on constitutional reform. As a result, Prime Minister Renzi resigned. Renzigned? Boom. Coined it. Also, Austria held a Presidential runoff election between the Green Party and the Freedom Party, which would kind of be like us here in the US having a runoff between the Green Party and the Libertarian Party. Not in terms of platform or ideals, but in terms of...overall popularity. This will be the first time the main parties haven’t held the Presidency since World War II. So. Europe (specifically the Eurozone) is a bit of a mess right now (still), and not looking like it’s going to get any better (cue French elections, Italian banking crisis, Greece defaults (again)) in the immediate future. Which is why we thought this month’s note should look at...that insurance case study we promised last month.
Is it just us, or does the calendar seem to fly off the wall once October comes around? The weather gets a little colder, the new season of American Horror Story starts up, you start thinking about the holidays, and then BAM! the New Year is on you like spices in an Emeril Lagasse gumbo. And it doesn’t hurt that Halloween is our favorite holiday of the year. And yes. It’s a holiday.
This week’s note is about WABBITs. Have you heard of this? It stands for Weighted Averaged Bond Builder Interest Treasuries. They are a great way to add some noncorrelated performance while reducing overall volatility within portfolios and limiting the various….hah. Yeah right. We just made that up. We’re talking about these kind of wabbits:
While the holidays are a great time to reflect on the year that was and start making plans and dreams for the year ahead, it’s actually not the best time to take a look at your finances. The best time to do that is...now, for most of you. October and November. Open enrollment is about to start - the time of year where you make elections for workplace benefits for the next year - and we would suggest it is the perfect time to step back and look big-picture as well. We’ll highlight a couple things to pay attention to...and of course, are more than happy to help you work through some of these decisions as we move into the New Year.
Be vewy vewy quiet...we’re hunting wabbits
Risk is one of those words that means something different to everyone...and therefore has people coming up with various vague yet philosophically profound-sounding definitions like “the possibility of more things happening than will happen”, “the unknown”, or “am I the eponymous character in a live-action Schrodinger’s cat experiment?” (okay, we made that last one up).
For financial planners like us, risk is paradoxically both the antithesis of our business but also the main reason we’re needed in the first place. Heath Ledger’s Joker had a nice little quote about this very thing:
Batman: “Then why do you want to kill me?”
Joker: “I don’t...I don’t want to kill you...what would I do without you? No, no, no!...you….complete me.”
Technically, I think in that example risk is actually Batman to the financial planner’s Joker...but we’ll go with it anyway. So where does risk come into play in financial planning? Well, everywhere. But we’ll just look at two examples today: insurance and portfolio management.
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